June, 2012:

THE URBAN LANDSCAPE IS CHANGING, BUT INTO WHAT?

Urban centers have a big trash problem coming down the chute. According to a report published this month by the World Bank, we will be producing 2.2 billion tons of garbage globally every year by 2025. Not only will there be more people, but each one of them will be churning out more waste—at least three pounds per person.

“It’s growing by leaps and bounds,” says Dan Hoornweg, a World Bank urban specialist who coauthored the report.

Plasma fixes all…

The world’s expanding waste problem is causing many to look for a solution in new technologies. One in particular, plasma gasification, has been getting more attention recently because it offers to turn that refuse into clean energy. The innovation is a waste-processing technique that obliterates trash with a plasma torch and leaves two byproducts, a glassy solid and a mix of combustible gases.

Japan has been operating waste-to-fuel gasification plants since the turn of the century and Canada recently began delivering power to homes in Ottawa with a similar plant. U.S. waste management and energy authorities remain curious but hesitant. And no one seems to want to be the first to try it out. As proposals emerge and die, advocates have lined up for and against plasma gasification. Some see a win-win scenario of reduced waste and energy self-sufficiency. Others consider the technology to be an experimental distraction from the tenets of sound waste-management policy.

In 2010, Dovetail Partners, a non-profit corporation that advises companies and governments on environmental decisions, wrote up a report about plasma gasification for the city of Palisades, MN. City officials were interested in opening a plant, but wanted more information about the technology’s track record and environmental impact. Dovetail concluded that when operating correctly, a plasma gasification plant is a closed system.

In that system, preferably sorted trash enters the machine. It gets hit with an arc of ionized gas that reaches temperatures above 15,000 degrees Fahrenheit, hot enough to immediately convert all of the organic material into carbon monoxide, carbon dioxide and hydrogen. The ash remnants fall to the ground and, when treated with water, solidify into a glassy lump.

Both products can be reused—the gases can be burnt as fuel and the solids can be ground up and made into pavement. Theoretically, everything gets captured during the process and no toxic materials leak out of the plant.

…Or does it?

This isn’t always the case. When looking at the track records of the few existing plants around the world, Dovetail found that some nasty things do escape—hydrochloric acid, particulate matter and dioxins. But none of the emissions were above the maximum level set by the U.S. Environmental Protection Agency.

Advocacy groups like the Global Alliance for Incinerator Alternatives have cited other studies about emission rates, but Jim Bowyer, a Dovetail Partners researcher, says these reports mix numbers from plasma gasification with those from other plants. “There are high-temperature incinerator units and then there are plasma, and one shouldn’t be confused with the other,” he says. “We found in every single case that the problems that have occurred have been in high-temperature incinerators.”

But there’s a larger problem with moving to any incineration technologies, which is that they encourage a move away from recycling. For a plasma gasification plant to operate most efficiently, trash would be separated first, removing metals and other materials that yield a higher profit when recycled and leaving only the organic garbage. But not everyone thinks this is what would happen.

“In the world of academia, you could envision these things developing simultaneously. In the real world, government doesn’t work that way,” says Eric Goldstein, director of New York City environment at the Natural Resources Defense Council.

To recycle or dematerialize

He would prefer to see governments pushing policies like curbside recycling and economic reuse incentives before we start obliterating our trash. “The concept is, let’s do everything we can to advance recycling first before moving to these new, largely unproven technologies,” he says.

Even if gasification plants can make our garbage disappear, they may also lure us into complacency. Watching a landfill get bigger and bigger at least encourages people to waste less. But having a black hole that we can throw our trash into and then forget about it could do the opposite, especially when it’s supplying power to our homes.

“If you have an incinerator, there’s an inherent incentive to feed that thing as much as possible,” explains The World Bank’s Hoornweg. “It’s not usually conducive to waste minimization, and waste minimization is the thing we should be asking for.”

For now the question is moot—building gasification units is very expensive. It only makes sense for companies if they know the fuel they get out of it will cover part of the cost and, so far, that equation has not played in the industry’s favor. In 2006, Saint Lucie County, FL, began planning to partner with energy provider Geoplasma to build a plasma gasification plant for the region. Last month, they ditched the proposal. County Commissioner Chris Craft blames the economy. “By the time we were finishing putting together the negotiation of the contract and the air quality permit, which takes a few months or so, the economy had collapsed,” he says.

Such obstacles surely won’t close the book on plasma gasification, Bowyer says. “Going forward, as waste becomes more and more of an issue in high-population areas, then gasification is going to be looked at more closely and it’s going to get more and more interesting.”

Plans for a 2,000 – 3,000 tonne per day waste to energy facility in Dubai that were unsuccessfully tendered three times have now reportedly been cancelled.

Financing issues and a project scope that was “too open” were said to be the challenges halting the project for the Dubai Muncipality, according to a report by Middle East Business Intelligence (MEED).

Two bids were submitted in November of last year with Japan’s Hitachi Lenovo touted as favourite. A proposal was put forward for three incinerators constructed at Al-Warsan, each with a 50MW capacity under a 20-year contract.

MEED quoted sources as saying that the municipality was keen to accept the power price of 26 fils a kilowatt hour, but not the proposed gate fee.

Abdulmajeed Abdulaziz Saifaie, the director of Dubai Municipality’s Waste Management Department reportedly said that Dubai is completing its waste management masterplan for the United Arab Emirates (UAE) emirate until 2030.

Earlier this year the UAE brought forward its policy to ban all disposal plastic products except those made from oxo-biodegradable plastic (see Waste Management World story).

Plans for a 2,000 – 3,000 tonne per day waste to energy facility in Dubai that were unsuccessfully tendered three times have now reportedly been cancelled.

Financing issues and a project scope that was “too open” were said to be the challenges halting the project for the Dubai Municipality, according to a report by Middle East Business Intelligence (MEED).

Two bids were submitted in November of last year with Japan’s Hitachi Lenovo touted as favourite. A proposal was put forward for three incinerators constructed at Al-Warsan, each with a 50MW capacity under a 20-year contract.

MEED quoted sources as saying that the municipality was keen to accept the power price of 26 fils a kilowatt hour, but not the proposed gate fee.

Abdulmajeed Abdulaziz Saifaie, the director of Dubai Municipality’s Waste Management Department reportedly said that Dubai is completing its waste management masterplan for the United Arab Emirates (UAE) emirate until 2030.

Earlier this year the UAE brought forward its policy to ban all disposal plastic products except those made from oxo-biodegradable plastic(see Waste Management World story).

Advanced Plasma Power Ltd., a U.K. waste-to-energy technology maker, plans to hire a financial adviser to help raise money for 400 million pounds ($629 million) of planned projects to turn trash into power.

The company has been speaking to investment banks and specialist firms and has selected the “frontrunners,” Rolf Stein, chief executive officer of London-based Advanced Plasma, said by phone.

“We already have some funding commitments in place and we are about to go very actively into the market,” Stein said. “We will appoint the adviser as soon as we have certainty on the outcome of the U.K. Renewable Obligation banding review.”

The U.K. is examining the level of support it gives to different renewable energy technologies under a banding review. Confirmation of the new support levels, which will come into effect next April, are expected within weeks.

The U.K.’s goal is to get at least 15 percent of its energy from renewable sources by 2020, a sevenfold jump from 2008. Bioenergy facilities such as Advanced Plasma’s have the potential to provide as much as 30 percent of this target, according to the Department of Energy and Climate Change.

Advanced Plasma is planning to build as many as 10 projects across Britain that use waste from homes and businesses to generate electricity and heat. They are expected to have a total capacity of 160 megawatts.

The adviser will likely work with the company on its entire project portfolio, the CEO said. They may need as much as 400 million pounds and the financial close of the first facility is expected by the end of the year or early 2013.

The waste-to-energy developer has seen a “very sharp” increase in interest and demand for its technology from regions including North America, Asia and Africa, it said. It’s proceeding with a project in Africa that it’s looking to develop with another U.K. business specializing in the area, Stein said, declining to disclose further details.

From cars to cellphones, pharmaceuticals to plastics, and air conditioning to water heating, energy is part of people’s lives more than ever before. Energy is vital for the effective functioning of our modern society and is a key driver for human development and economic prosperity (SEHK: 0803, announcements, news) . However, the poor local air quality and global climate changes we have been witnessing are attributed to an explosive increase in global energy consumption.

We take pride in Hong Kong being Asia’s “world city” and an international financial centre, and being ranked by the Heritage Foundation as the world’s freest economy for 18 consecutive years. This is underpinned by having not only good governance, built on core values such as the rule of law, transparency, freedom, equality and openness, but also continued economic growth.

For a metropolitan city and a service-oriented economy like Hong Kong’s, energy is of paramount importance to economic activities therein. But, somehow, Hong Kong has in place only a few lines on its energy policy objectives, displayed on the Environment Bureau’s website, and various measures focusing on energy conservation and efficiency. We do not have a structured, coherent and comprehensive energy policy to support our pursuit of an economy for sustainable development.

The growing complexity and strategic importance of energy policy demands a “whole of government” approach. The incoming administration should consider empowering the Environment Bureau (best to call it the Energy and Environment Bureau) to formulate and co-ordinate an energy policy with objectives, strategies and action plans to meet the needs and aspirations of our community and Hong Kong’s commitments as a responsible global citizen.

The bureau should study a wide range of energy issues, which include energy conservation and efficiency, and also promote a competitive energy market, diversify energy supplies; invest in energy research and development; and step up international co-operation.

Dr C.W.Tso, adjunct professor, City University (former head of HK Electric power)

We hear that following the row over higher electricity tariffs earlier this year, CLP has put more or less on “permanent hold” the work on converting its Castle Peak ‘A’ power plant from coal-fired to the cleaner gas-fired boilers. It will now continue to run on coal with just one experimental agglomerator, which removes particle matter, but no scrubbers, which take out sulphur.

The government is pressing the power companies to meet emission standards but it would appear that it only wants them to “meet” these standards rather than to better them by a wide margin. That is, the Environment Bureau doesn’t want them to improve their emissions too much, because the resulting capital expenditure would result in a rise in tariffs.

The scheme of control, which is negotiated with the government, allows companies an agreed rate of return from its depreciated net assets. At the same time, the government urges the power companies to reduce emissions, but it doesn’t have the guts to tell the public that this will cost more. Instead, it publicly blames the power companies when they try to raise tariffs.

CLP had wanted to raise tariffs by 9.2 per cent but after the government-inspired row, ended up with a 4.9 per cent increase. The direct effect of this is lower air quality in an arrangement agreed by the bureau.

At the same time, CLP has been forced by the Hong Kong government to buy its gas from the mainland at prices that will have to be negotiated with supplier CNOOC (SEHK: 0883). But since CLP has been cut off from global markets, it’s not hard to see who will have the advantage in those discussions.

The Environment Bureau, led by Edward Yau Tang-wah, plays a highly duplicitous role in the politics of Hong Kong air quality. On the one hand it claims that it can’t do much about Hong Kong’s dirty air and says much of the pollution comes from the Pearl River Delta; on the other it ignores effective measures that could be taken to get old buses and trucks off the road.

When CLP wants to convert to environmentally cleaner gas, the government and the bureau show they have no stomach for a fight with the public and agree to lower standards

We note that today you have forwarded your enquiry on 21 April to us again. Perhaps for some reasons our reply to you on 11 May did not reach you, so I am forwarding the reply below to you again. Kindly let me know when you have received this mail, thanks.

Many thanks for your e-mail expressing your concerns on the conversion works of CLP’s power plants.

As you may be aware, CLP has two coal-fired power plants in Hong Kong, namely Castle Peak “A” (CPA) and Castle Peak “B” (CPB) plants.

In the past few years, CLP has spent around $9 billion in retrofitting its four CPB power plants. The project includes installation of three types of emission control equipment, namely the Boosted Over Fire Air (BOFA), Selected Catalyst Reactor (SCR) systems and the Flue Gas Desulphurization (FGD) facilities. The installation has reduced the emissions of CPB units by 99.76% for respirable suspended particulates, and over 90% and 50% for sulphur dioxides and nitrogen oxides respectively.

CPA coal-fired power plants are used with a lower priority after the gas-fired plants and the CPB coal-fired plants with retrofits. The conversion works which CLP is now putting on hold are related to the provision of additional generating capacity at the CPA site. In view of the lower than anticipated maximum power demand in 2011, we have strong reservations about the proposal, and have advised CLP to submit the proposal if necessary with supporting justifications in accordance with the Scheme of Control Agreement for our consideration.

Our energy policy objectives are to ensure safe and reliable energy supplies at reasonable prices whilst minimising the environmental impact caused by the production and use of energy. Starting from 1997, power companies in Hong Kong have not been allowed, for environment reasons, to build new coal-fired power plants. To reduce the emissions from the power sector for improving the air quality, we have been imposing emission caps on their emissions, starting from 2005, firstly via their specified process licence and then via a Technical Memorandum (TM) issued under the Air Pollution Control Ordinance. The emission caps have been progressively tightened and the current emission caps for the power sector are about 46%, 76%, 48% of the baseline levels of SO2, NOx and RSP respectively in 1997. In 2010, we promulgated the Second TM to further tighten these emission caps from 2015 onward by 50%, 35% and 34% respectively from the current levels. To meet the new tightened emission caps under the Second TM, the two power companies will have to maximize the use of their existing gas-fired generation units and prioritize the use of their coal-fired generation units equipped with advanced emission abatement facilities to further reduce their emissions. As an on-going process, we will review the TM once every two years.

Dear Sir,
We have heard from Clear the Air sources that CLP’s design team who were working on the re-firing work at Castle Peak ‘A’ station has now all been put on semi-permanent hold. and that apparently when the tariff rate rise was hit the first thing that had to get the chop was the conversion of Castle Peak ?

We are informed the existing ‘A’ units will now continue to run on coal but with no environmental measures other than one experimental Indigo agglomerator for four TG sets.

So it seems Government fails again by cutting out the proposed improvements that everyone was looking for ?
Unfortunately, if we want cleaner air it seems we have to make some investment.
We note however that electricity subsides have swung back into force.

AGARTALA: Agartala-based Association for Research on People and Nature (Arpan) has planned to set up a plasma gasification plant in the city to manage the growing solid waste here. The organization has also trained as many as 30 female entrepreneurs on manufacturing carry bags with waste paper and cloth.

Arpan vice president D Daschoudhury on Wednesday said the Agartala Municipal Council (AMC) had been facing problems in dumping solid wastes and recycling non-degradable desecrates generated by city dwellers. “AMC does not have trained manpower and proper infrastructure for solid waste management. But, they are spending about Rs 70 lakh every month in cleaning, sweeping and dumping the waste into the ground and this is a major concern for us,” Daschoudhury said. Plasma gasification is a technology to convert solid waste into energy at medium-scale investment. This technology is successfully running in Bangalore, Nagpur and Chennai.

On April 13, 2012, the U.S. Environmental Protection Agency (“EPA”) published its first-ever carbon dioxide emission standards for new fossil fuel-fired power plants (“Draft Rule”).[1] The Draft Rule essentially requires all new fossil fuel-fired power plants to meet the carbon dioxide (“CO2″) emissions profile of a combined cycle natural gas plant. While most new natural gas plants will not be required to include any new technologies, no new coal plants can be constructed without carbon capture and sequestration (“CCS”) capabilities. Litigation is expected over the Draft Rule due to the novel nature of the Draft Rule in regulating CO2 and EPA’s departure in several instances in the Draft Rule from its usual method of setting new source performance standards (“NSPS”) on a source category by source category basis.

The Draft Rule applies only to new fossil fuel-fired power plants, but we note that the Draft Rule will trigger a requirement under the Clean Air Act for the EPA (in coordination with the states) to address CO2 emissions from existing sources. With approximately 600 existing coal plants in the U.S., this future action to regulate CO2 emissions from existing sources is arguably more significant than the Draft Rule itself.

Below we provide highlights of the Draft Rule. For a more in-depth analysis of the Draft Rule and its implications for your business, please contact Richard Saines, Marisa Martin or Daniel De Deo. Full contact details provided in the left-hand column.

Overview

The Draft Rule is the result of litigation that commenced in 2008 between the EPA and several environmental groups, states and the City of New York.[2] The plaintiffs in that litigation challenged a 2006 EPA rule setting NSPS for electricity generating units (“EGUs”) that did not address greenhouse gases (“GHGs”). To resolve the litigation, the EPA and plaintiffs entered into a settlement agreement in December 2010 that required the EPA to take certain actions relating to NSPS for electricity generating units.[3] The EPA agreed to issue a proposed rule under Section 111(b) of the Clean Air Act that includes performance standards for GHGs for new and modified electricity generating units. The EPA also agreed to issue a proposed rule under Section 111(d) of the Clean Air Act setting emission guidelines for GHGs from existing electricity generating units. After nearly a year of delay, the EPA issued the Draft Rule in order to comply with the first requirement in the settlement.[4]

CO2 Emissions Standard & Covered Electricity Generating Units

The Draft Rule establishes a NSPS equal to a single output-based CO2 emission limit of 1,000 lb CO2/MWh (“CO2 Standard”) that is applicable to new electricity generating units (referred to as “Covered EGUs”, defined below). The CO2 Standard is equivalent to the CO2[5] emissions from a natural gas combined cycle power plant. The EPA determined that the CO2 Standard constituted the “best system of emission reduction” (“BSER”) which has been “adequately demonstrated”, which is the definition of “standard of performance” under Section 111(a) of the Clean Air Act.

Notably, the EPA proposes a new TTTT category of “new sources”[6] subject to the CO2 Standard (deemed “Covered EGUs”) that includes both coal and natural gas power plants in one category. Generally, the EPA sets a NSPS based on the type of technology used and does not combine sources into one category with one NSPS. The new TTTT category combines boilers and integrated gasification combined cycle (“IGCC”) units (currently included in the Da category) and combined cycle units that generate electricity for sale and that meet certain size criteria (currently included in the KKKK category). The Draft Rule defines a “Covered EGU” as “any fossil fuel-fired combustion unit that supplies more than one-third of its potential annual electric output and more than 25 MW net-electrical output (MWe) to any utility power distribution system for sale” with some exceptions. Based on this definition, Covered EGUs include electric utility steam generating units (“boilers”); stationary combined cycle combustion turbines and their associated heat recovery steam generator (“HRSG”) and duct burners; and IGCC units, including their combustion turbines and associated HRSGs. Covered EGUs do not include stationary simple cycle combustion turbines (e.g., peakers) or EGUs located in non-continental areas. Also, solid waste incineration units subject to emission requirements under Section 129 of the Clean Air Act are not subject to the Draft Rule.

New coal-fired EGUs would need to capture approximately 50% of the CO2 at the exhaust stream at startup to meet the CO2 Standard. Alternatively, the EPA is proposing a 30-year averaging compliance option that would be available for coal- and pet coke-fired Covered EGUs that did not install carbon capture technology at startup. Under this option, coal- and pet coke-fired Covered EGUs, with EPA’s approval, could comply with a less stringent CO2 annual limit for the first ten years of operation and a more stringent CO2 limit for the last twenty years such that on a 30-year basis, the facility would meet the CO2 Standard. The initial ten-year limit would be 1,800 lb CO2/MWh, which is the best demonstrated performance of a coal-fired facility without CCS. The CO2 limit for the following twenty years would be 600 lb CO2/MWh and beyond the 30th year, the source would be required to meet the CO2 Standard (i.e., 1,000 lb CO2/MWh).

Trading of Emission Credits to Meet the CO2 Standard

After the federal cap-and-trade program proposal failed on the national level in 2010, there has been speculation whether the EPA could allow for the trading of emission credits under the existing Clean Air Act. Some commentators interpreted the NSPS provisions in Section 111 of the Clean Air Act to allow EPA to authorize the trading of emission credits to meet a NSPS for greenhouse gases. This is based on the language of Section 111 as well as the fact that the EPA has explicitly determined that a cap-and-trade program constituted BSER for other non-greenhouse gas pollutants (e.g., mercury).[7] Without significant discussion, the Draft Rule states that no averaging or emissions trading among Covered EGUs would be allowed for the CO2 Standard and that each Covered EGU would be required to meet the CO2 Standard. As discussed below, whether trading may be authorized for regulating CO2 from existing power plants (either directly or through state equivalency determinations) remains an open question.

Sources Excluded from the Draft Rule

Modified Sources & Reconstructed Sources

Covered EGUs undergoing modifications that increase CO2 emissions and reconstructed sources are not required to meet the CO2 Standard under the Draft Rule. The EPA notes that it had insufficient information to develop a proposal for reconstructed sources or sources that undergo “modifications” that would normally trigger NSPS and subject the source to the CO2 Standard. The EPA states that most modifications that would increase the maximum achievable hourly rate of CO2 emissions would likely be related to the installation of pollution control equipment, which is an action specifically exempted from the definition of modification. Sources undergoing modifications or reconstructed sources would be subject to any future CO2 standards that are issued for existing sources (see further discussion below).

Transitional Sources

Notably, the EPA creates a new category of power plants – deemed “transitional sources” – in the Draft Rule. A transitional source is defined as a power plant that has received approval for its Prevention of Significant Deterioration (“PSD”) construction permit by April 13, 2012 (i.e., the date of Federal Register publication of the Draft Rule) and has commenced construction by April 13, 2013. The EPA justifies its exclusion of transitional sources from the Draft Rule based on gaps in information regarding the extent such sources have sunk costs and material commitments such that the CO2 Standard would not be considered BSER.

Approximately 15 power plants are expected to be considered transitional sources and thus not subject to the Draft Rule. The Draft Rule specifically notes that although transitional sources are exempted from the CO2 Standard, they would be subject to the requirements the EPA will promulgate for existing sources under Section 111(d) of the Clean Air Act, which is discussed in more detail below. In addition, a transitional source’s PSD permit may also contain CO2 limits.

Application of CO2 Standard to Existing Sources

The EPA projects in the Draft Rule that most new power plants in the U.S. will be natural gas-fired and thus not required to install any add-on technology to comply with the Draft Rule. Any new coal plant built in the U.S. will be required to install CCS in order to comply with Draft Rule but new coal plants that are not considered “transitional sources” (and exempted from the Draft Rule) are expected to be few, according to the EPA. Because there are hundreds of coal fired-power plants already constructed and operating without CCS, a significant issue will be the extent to which the Draft Rule will affect existing power plant sources.

Emission Guidelines for Existing Sources

The EPA emphasizes that the Draft Rule, promulgated pursuant to Section 111(b) of the Clean Air Act, does not affect existing power plant sources. While technically accurate, Section 111(d) of the Clean Air Act requires the EPA, after promulgating NSPS under Section 111(b) for pollutants like CO2 that are not regulated under the National Ambient Air Quality Standards (“NAAQS”) or as a hazardous air pollutant, to issue standards of performance for “existing sources”.[8] Specifically, Section 111(d) states that the EPA “shall prescribe regulations which establish a procedure under which each State shall submit . . . a plan which establishes standards of performance for any existing source for any air pollutant . . . to which a standard of performance under this section would apply if such existing source were a new source.” Because the EPA set NSPS for CO2 for new sources in the Draft Rule, it is obligated under Section 111(d) to set performance standards for CO2 from existing sources.

Under Section 111(d), the EPA issues regulations known as “emission guidelines” that establish binding requirements that the states must address in the development of their state plans. For the CO2 Standard, existing sources would include transitional sources as defined by the Draft Rule, modified sources, reconstructed sources and any other sources that are not new sources. Because many pollutants are regulated under the NAAQS or are hazardous air pollutants, there is little precedent for EPA’s actions under Section 111(d). When it has acted, the EPA has generally issued a model rule that can then be adopted by the states. For instance, for mercury emissions the EPA determined that a national cap-and-trade program was BSER for existing sources and issued a model rule establishing the program for adoption by the States.[9]

States must adopt the emission guidelines for existing sources through a state rulemaking action with EPA review and comment similar to the State Implementation Plan (“SIP”) process. The states and EPA may set less stringent standards or longer compliance schedules for existing sources considering cost of control; useful life of the facilities; location or process design at a particular facility; physical impossibility of installing necessary control equipment; or other factors making such variances appropriate. If the state fails to submit a satisfactory plan, the EPA has the authority under Section 111(d)(2) to prescribe a plan and to enforce the provisions of such plan.

If the EPA fails to address CO2 emissions from existing sources as required by Section 111(d), it could face additional litigation under the Clean Air Act as well as an enforcement action in connection with the 2010 settlement agreement, which required the EPA to issue emission guidelines for existing fossil fuel-fired sources.

Equivalent State Programs

Due to the absence of comprehensive climate change policy on the federal level, many states have already implemented programs aimed at controlling greenhouse gas emissions from power plants (e.g., Renewable Portfolio Standards (“RPS”), cap-and-trade programs, state-based CO2 emission limits for power plants). Several states and policymakers have indicated such programs should be considered equivalent to any emission guidelines for existing sources issued by the EPA. For example, the State of California has stated that its greenhouse gas cap-and-trade program that covers power plants should be considered for the purposes of applying the CO2 Standard under the Draft Rule to existing sources. Other commentators have noted that state RPS programs could be similarly treated. Due to the lack of precedent in the area, whether state-based greenhouse gas trading programs (or other state rules that control CO2 emissions) will be considered equivalent to the Draft Rule remains an open question. The EPA could issue a model rule setting forth the necessary requirements of any state program seeking equivalency or could work individually with states to approve programs that it deems would result in equivalent emission reductions.

Next Steps

The EPA is requesting public comment on the Draft Rule, and all comments must be received on or before June 25, 2012. The EPA will hold two public hearings on the Draft Rule on May 24, 2012 in Chicago and Washington, D.C. While the Draft Rule may be changed during the comment period, any power plant constructed after April 13, 2012 is required to meet the CO2 Standard, so it is essentially in force at this time. Regarding the timing of the EPA’s emission guidelines for existing sources, any regulation of CO2 from existing sources will be controversial. It is widely expected that the EPA will not issue a rulemaking for existing sources in advance of the presidential elections in November 2012.